The Social Security Board of Trustees on Friday released its annual report outlining Social Security's financial health. The Trustees found that the combined assets of the Old-Age and Survivors Insurance and Disability Insurance trusts will be exhausted in 2036, at which point beneficiaries could expect to receive about 77% of scheduled benefits. The 2010 Trustee report concluded that the trusts would be exhausted in 2037.
The Disability Insurance Trust Fund, however, will be exhausted in 2018, according to the Trustee report, and at minimum, a reallocation of the payroll tax rate between OASI and DI will be necessary.
Costs for the OASDI program exceeded non-interest income in 2010 and will continue to do so in 2011. The Trustees expect costs will exceed income for the remaining 75-year period. Over the same period, the trust funds would require an additional $6.5 trillion in present value dollars to pay scheduled benefits.
“The current Trustees Report again reflects what we have long known to be true -- we need changes to ensure the long-term solvency of Social Security and to restore younger workers' confidence in the program,” Michael Astrue, commissioner of Social Security, said in a statement. Astrue was supportive of the president's Work Incentive Simplification Proposal, which he said would be a "good start for bipartisan debate."
In a press briefing on the report, Labor Secretary Hilda Solis (left) said, "While trust fund income and earnings are projected to cover costs for a few years, the trust fund assets will ultimately be used to pay for benefits," according to prepared remarks.
"This is especially important as the unemployment rate remains unacceptably high," she added. "Loss of wage income has and continues to be devastating for working families across the country. But it also erodes the payroll tax base – the revenues from which are needed to pay current program benefits."
Solis named several efforts the Department of Labor is undertaking to improve the unemployment situation and create more revenue for Social Security and Medicare: including educating and training low-income youths through Job Corps; properly classifying workers to ensure they are paid and taxed correctly for the job they do; and partnering with "state and community-based organizations, business-serving associations, and economic development agencies to expand employment opportunities for people with disabilities."
"Increasing the employment of people with disabilities is not only good for them, it's good for Social Security and Medicare, and critical to the economic prosperity of our country," Solis said.
Solis stressed the importance of making sure the "Affordable Care Act is successfully implemented," adding that it will rein "in costs even as we expand and promote quality."
Senate Finance Committee Chairman Max Baucus, D-Mont., also pointed to the Affordable Care Act as an important part of the solution to Medicare's problems.
“Health care reform strengthened Medicare by cutting wasteful subsidies to private insurance companies and helping doctors save money by increasing coordination, and these improvements extended the life of the program by more than a decade," Baucus (left) said in a statement. "Our efforts to strengthen Medicare are now even more important because of the news that the current economic crisis has hit the Medicare trust fund and hit it hard. We must continue to fight for and protect the Medicare program to ensure it is as dependable for the next generation as it is for our seniors today."
Baucus argued that Social Security is not the cause of high deficits and debt, and "shouldn’t be a scapegoat in our answer to them."
"Social Security needs a long-term answer," he said, "and we should develop a long-term solution, but the current situation does not necessitate rushed or severe action. We must continue to protect the Social Security benefits our seniors count on and also work to bring our deficits and debt down to strengthen and grow our economy.”
Sen. Orrin Hatch, R-Utah, released a statement on Friday saying that "any discussions to bring down the nation’s over $14 trillion debt must include" Social Security and Medicare. Hatch is the ranking member of the Senate Finance Committee, which has jurisdiction over Medicare, Medicaid and Social Security.
“This report makes one thing very clear: the status quo is a plan to end Medicare and Social Security. The path to tackling our over $14 trillion debt is reforming these two programs that look increasingly like nothing more than an empty promise that our kids and grandkids will pay for, but never see,” Hatch said in the release, calling entitlement programs "the largest drivers of our debt."